Financial services compliance is a dynamic target with extreme consequences for non-compliance. For financial services firms, there is absolutely no room for error. Firms must remain vigilant to ensure they meet their obligations under a growing set of laws, regulations, and standards.

The Intersection of Financial Services Compliance & Technology

Financial Services Compliance

Compliance is not a new problem in the world of financial services. While compliance reporting may have been more manual in the past, the extreme complexity of the compliance and security issues facing these firms today makes manual processes technically impossible to maintain. Instead, to address the growing complexity and risk, firms must replace the check-box approach to compliance, reporting, and security and with a robust compliance platform and verticalized advisory services.

Each of the security measures and compliance requirements put in place by various regulatory agencies is designed to support the stability of the global economy and protect the privacy rights of consumers. Additionally, the exponential growth of third-party relationships has led to the need to provide improved management to reduce risk exposure. However, abiding by the precise reporting and data management requirements of each entity obligates financial services firms to implement complex frameworks that are costly and time-consuming. But non-compliance also comes with harsh consequences, including fines and penalties, sanctions, reputational loss, lost revenue, and more.

The Compliance Landscape for Financial Services

Highlighted below are several of the most critical regulations and standards that must be met by the financial services sector:


The Financial Industry Regulatory Authority (FINRA) is an independent organization that helps investors and firms by serving as the first line of oversight for the brokerage community. FINRA rules are aimed at ensuring a safe and fair market, with general standards that are continually being updated based on changes to the global marketplace. FINRA regulations are generally focused on complex cybersecurity themes to protect against cyber intrusions, detect compromises to digital systems, and create a business continuity and breach plans.

  • SEC

Financial firms must adhere to regulations set forth by the Securities and Exchange Commission (SEC). The SEC promotes fairness, transparency, efficiency, and compliance of all publicly-traded companies in the U.S. Financial firms are required to comply with the SEC’s Financial Reporting Requirements, which include annual and quarterly reporting as well as other periodic filings. Financial firms must also adhere to SEC governance and risk management standards, such as cyber risk policies, identity theft prevention plans, data security processes, insider trading safeguards, and more.

The SEC Chair, Gary Gensler, recently expressed his support of the Office of Information and Regulatory Affairs Fall 2022 Unified Agenda of Regulatory and Deregulatory Actions, saying the agenda “reflects the need to modernize our ruleset, moving deliberately to update our rules in light of ever-changing technologies.”

  • SOX

First passed in 2002, the Sarbanes-Oxley Act (SOX) was established to protect individuals by increasing transparency in the financial services sector and requiring formalized checks and balances for individual entities. In today’s world, SOX compliance is aimed at limiting access to internal systems that contain confidential or financial data. Fortunately, SOX internal controls are also solid business practices that can enhance your firm’s cybersecurity risk profile and reduce the threat of insider attacks.

  • Due Diligence Requests (DDQ)

Compliance with investor due diligence requests (DDQs) has become more and more complex as the Financial Services industry grows. DDQs typically involve detailed information about financial operations, accounting practices, and related risk factors. While responding to these inquiries can be a difficult process, it’s necessary in order to maintain regulatory compliance and ultimately build trust with investors. Financial services firms need to develop a reliable system for tracking and responding to DDQs quickly and accurately, as well as an audit trail of the communication process to prove compliance.

  • Cybersecurity Insurance

Cyber insurance carriers have expanded their compliance requirements and increased their schedule of audits to ensure that firms have robust controls in place. These audits assess security protocols, policies and procedures, disaster recovery plans, and more. Financial services firms must plan ahead for these inspections by having the right personnel prepared with well-documented processes and systems to prove compliance. Additionally, firms should have an external cybersecurity partner who can provide executive-level support to ensure the audit is successful.

Cybersecurity & Compliance: What’s the Difference?

Security and compliance are often mistakenly assumed to be synonymous, yet they are, in fact, distinct. Security and compliance are both essential, yet their purposes vary. While security is meant to protect data and infrastructure, compliance serves as a means of meeting legal or regulatory obligations, often which are around cybersecurity.

Compliance and security have similar objectives around managing risks and securing sensitive data and systems but have different processes and workflows to accomplish these goals. Put simply, compliance is the act of meeting contractual or third-party regulatory requirements by adhering to set guidelines and standards. On the other hand, security requires implementing effective technical controls in order to safeguard assets from cyber attacks.

Both are critical for the financial services sector.

Solving Compliance Now & Into the Future

In 2023, regulations are expected to become even more stringent and expansive as regulatory bodies and other organizations respond to increasing risks. Financial services firms must stay up-to-date on relevant regulations and have the right IT infrastructure, personnel, and external partners in place to ensure compliance and protection. Financial Services firms must also develop reliable systems for responding to DDQs quickly and accurately, as well as do what is required to maintain robust cyber insurance policies. With the right measures in place, financial services firms can ensure compliance and mitigate risk.

Understanding the evolving world of IT compliance for financial services firms is an ongoing conversation, not a one-time decision. Learn more about the compliance obstacles facing the financial services sector by downloading Coretelligent’s complimentary whitepaper: How Financial Services Firms Can Manage Compliance.


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